For anyone hoping to refinance publishing on the back of advertising, it may be the best of times to sell a new medium to advertisers, but it is the worst of times for advertising.
Nielsen reported this week that ad spending globally dropped 7.9 percent in the first quarter of 2009. U.S. ad budgets declined by a record 12.7 percent and growth in Chinese advertising, which has been consistently strong since the beginning of the economic meltdown, shrank to only 2.5 percent year-over-year.
All traditional media, from newspapers and magazines to TV and radio, showed marked declines. U.S. magazine revenue shrank by 22 percent; newspaper advertising revenue was down by 15.6 percent. Charts and more here.
I’ve seen a lot of conversation about how it will be awful or wonderful when Amazon presents advertising in its e-books. The fact is, contextual advertising has been patented for many years and designing it into “out of print and rare books” and the use of “advertising tokens” (essentially, tags that mark ad insertion points) doesn’t make the claim enforceable. There are more than 200 earlier patents of related functionality.
Contextual advertising can’t be protected, because it is a common business process today. Consequently, it is very hard to imagine these patents will be enforceable, though that doesn’t mean Amazon won’t place ads in books. It just means that anyone can place an ad in a book, in context or not. This has been one of the cornerstones of Amazon’s book project from the beginning—this is why the Google Books settlement explicitly includes shares of advertising revenue.
Just as Amazon once patented one-click purchasing features, which was overturned, this is merely a statement of potential business direction, not a significant move with regard to Amazon and its competition. Ads will support books in some cases, but in many readers will opt not to have them. It’s just another small step, not a particularly significant nor innovative one.